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Weekly Market Update for February 12, 2021

by Jim Ulland

This week can be summarized by the favorable market impact from improving Covid numbers, an increasing pace of vaccinations, the expectation of another stimulus package, and additional strong Q4 earnings reports. Market volatility from the impeachment trial did not occur, although the final vote is not expected until Sunday or later.

After the late fall and early winter spike of Covid hospitalizations and deaths, these numbers are now coming down, way down. We have almost reached the low point of last summer. In addition, there has been almost no flu this season. Perhaps the hand washing and mask wearing have provided additional benefits.

During the week, the Administration announced the purchase of another 200 million doses of vaccine from Pfizer and Moderna. Studies showed the Pfizer vaccine also provided protection against the virus variations that have recently emerged. Other studies said that one dose of Pfizer would provide 65% protection. The combination of those having contracted Covid and developing their own immunity plus the immunity from vaccines will have a meaningful economic impact by spring. Lockdowns are being relaxed, although many of the teachers’ unions will not let teachers return to the classrooms even with the CDC’s recommendation.

The coming stimulus package has received some criticism for not being targeted and for being too big. Remember, we must pay those borrowed funds back at some point. The proposal has not been finalized, so some positive changes still could be made.

The WSJ reported that job postings have returned to pre-pandemic levels. Unemployment is still high but trending ever so slightly down. This downward pace should accelerate as spring arrives. Corporate earnings also showed favorable trends. 81% of the largest 500 companies that have reported exceeded expected profitability. In fact, there was some concern that the stimulus package would overheat the economy and cause inflation. Those worries pushed interest rates higher and presented a headwind to our fixed income strategy Intelligent Fixed Income. After the 14.92% return last year (net of fees), a short pause is expected. The Nasdaq and SP 500 did not pause and powered ahead to set new records. The market’s path seems higher. Expect another burst when the stimulus package is adopted.

Our view continues to be that the market will move higher in 2021. This week’s performance was strong. The Nasdaq was +1.73%. The SP 500 was +1.23%. On Monday, the SP 500 was up +0.74%, Tuesday was -0.11%, Wednesday -0.03%, Thursday +0.17%, and Friday +0.47%. The Fed said during the week it would keep interest rates low, so we feel the modest rise in rates this week will not persist unless the final stimulus package is too big for its own good.

Next Monday is a holiday and the markets and our office will be closed. Earnings of mid-sized companies are still trickling out. Favorable trends are set to continue.

The information contained in this commentary is not investment advice for any person. It is presented only for informational purposes to assist in explaining factors that may have had an impact in the past or may have an impact in the future on client portfolios or composites. All expressions of opinion reflect the judgment of the firm on this date and are subject to change. Included information has been obtained from sources considered reliable, but we do not guarantee that the foregoing materials are accurate or complete. Investors should contact Ulland Investment Advisors for individualized information prior to deciding to participate in any portfolio or making any investment decision. Ulland Investment Advisors does not provide tax advice. All investors are strongly urged to consult with their tax advisors regarding any potential investment.

Performance quoted is past performance. Past performance is not indicative of future performance. There is always a possibility of loss. Current performance may be lower or higher than performance shown. Differences in performance versus the indices/funds may be attributable, in part, to differences in the asset make-up of the strategy vs. the indices/funds. Performance calculations are based on the reinvestment of dividends and gains unless these amounts were paid out to the client. Performance is subject to revision. See www.ullandinvestment.com for important strategy disclosures.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investing involves risk; principal loss is possible. Investors should consider the investment objectives, risk, charges, and expenses of the strategy carefully before investing. This and other important information can be obtained by contacting Ulland Investment Advisors.

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Ulland Investment Advisors

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